Luckin Coffee: Rise, Fall, and Reinvention — Part 6

Can we still learn from Starbucks?

This article is Part 6 of the eight-part chronicle on Luckin Coffee’s rise, collapse, and reinvention. It is the excerpt of a sharing by Luckin Coffee CEO Guo Jinyi in 2024, translated into English here. 

You can also read the other parts of the series here: Part 1, Part 2, Part 3, Part 4, Part 5, Part 7, Part 8

Is Starbucks Still Worth Learning From?

Su Xijia:
Starbucks once had an overwhelming advantage, but no one would say that today. In fact, Starbucks is now considering selling its stake in China.

Has Starbucks made mistakes? Is it still worth learning from?

Guo Jinyi:
On my recent trips to Dubai and Qatar, I observed many Starbucks stores. When I visited Japan, I saw how Starbucks stores seamlessly integrated with local landscapes and innovated around local products. Achieving this level of localization is not easy.

For us, the most valuable lessons to learn from Starbucks are their establishment of coffee culture, brand communication, and their long-term efforts across the supply chain, from origin to retail.

Luckin Coffee is fortunate to be able to follow Starbucks’ pace in supply chain management—what took Starbucks 40 years, Luckin might achieve in 5-8 years, because we can learn from the challenges they have already faced.

Before Luckin, many brands tried to benchmark against Starbucks, but they attempted to compete using the same strategies as Starbucks.

In the business world, if you have a powerful competitor ahead of you and you adopt an identical strategy, you have no chance of surpassing them. Starbucks has already established its brand positioning and supply chain advantages.

Starbucks’ challenges in China stem from two main factors:

1. The rise of China and increased consumer confidence.
   • Young Chinese consumers are no longer willing to pay a premium for foreign brands.
2. Changes in commercial property dynamics.
   • In the past, Starbucks enjoyed significant advantages in securing prime retail locations, often negotiating exclusive leases or paying rent based on revenue turnover.
   • During the pandemic, Starbucks benefited from closed malls by not having to pay rent due to the absence of sales, and many shopping malls even offered renovation subsidies to attract them.
   • However, the landscape has changed—today, landlords rent to whoever offers the most money, and the old advantages no longer apply.

This shift made me think: What should we do?

My conclusion is that we must return to the essence of business—earning money through real capability, not premium pricing. Profits made from premium pricing will eventually have to be returned.

I told Yang Fei that any brand premium Luckin earns should be passed on to our consumers. Our edge comes from efficiency and supply chain advantages.

I’ve also reflected on why our market competition intensified when Luckin’s store profits reached 30% and our company’s net profit hit 20% in Q2 last year.

It’s because we achieved high profitability before establishing absolute market leadership.

In China’s highly competitive market, any excess profit is bound to be challenged. If Luckin earns 5 RMB per cup while competitors earn only 3 RMB or 2 RMB, they can easily enter the market and compete.

However, if you enter a market and only make 3 RMB per cup, new entrants will find no room to operate—this is precisely Coca-Cola’s strategy.

Coca-Cola sells at 3 RMB per bottle, and if a new brand tries to match this price, it won’t achieve the same volume. The only option would be to lower prices further, leading to unsustainable losses.

I believe Starbucks has the ability to adjust its strategy, and we look forward to seeing how it evolves both globally and within China.

Every brand needs a great competitor—one that is worthy of respect—because strong competition drives mutual growth.

If a market is monopolized by one player, it can lead to complacency and arrogance within the management team, which is extremely dangerous.

I have a very open attitude—if a company’s business model can be fully explained and replicated by competitors, it means the company lacks true competitive advantage.

A truly great company should be able to lay out its business model openly, yet competitors still struggle to replicate it successfully.

The coffee industry is both one of the easiest and most difficult industries to enter. By making incremental improvements in every aspect, the combined effect can create a huge competitive advantage at the company level.

You can also make reference to the following Momentum Works reports and articles for more:

• Inside Luckin Coffee
• Coffee in Southeast Asia
• Chinese F&B in Southeast Asia
• Quick Commerce in China 2025
• Food delivery in Southeast Asia 5.0